The number of software applications used by a typical computer system user has rapidly increased over the past few decades. The increase in software applications among owners of portable computer systems has also increased to the point where owners of personal digital assistants (PDAs) maintain a library of computer software programs at their disposal.
The available distribution channels for software dictate, more than any other factor, the availability of software applications for computer users. In other words, the limited number of software distribution channels available today, not the software developers, dictates the availability of software for end users. This is the result of most software developers having no direct outlet to end users. Instead, they must use some established form of software distribution channel. For various economic reasons, as described below, most software distribution channels restrict the number of software titles that are available to end users.
Moreover, software titles for PDAs typically sell better at lower prices. Typically, the retail prices of software application programs for desktop computer systems are less than the cost of the desktop computer system itself. Thus, the ratio between the software price and the price of the device the software is running on often is the determining factor influencing a users decision to buy a software application. Therefore, a cost effective price point for software applications targeted for PDAs should be in a range that is substantially less than the cost of the PDA itself. For instance, someone that purchases a PDA in the range of $100.00 to $300.00 may not be motivated to purchase a software application for $150.00 (or more), but may acquire several applications in the low cost range of $5.00 to $25.00. Unfortunately, software distribution channels do not readily exist today for distributing large amounts of software titles within this low cost range. Additionally, a user is generally not willing to purchase a software title if they feel an unwarranted amount of effort is necessary to get the new software.
Software titles are primarily distributed today using three software channels: In-store retail, Internet retail, and bundled with hardware. None of these distribution channels offers a reasonable avenue for distributing large amounts of software titles in the low cost range.
Regarding the in-store retail distribution channel, retail outlets provide software applications to customers who can directly visit a store and purchase the software product in a physical medium. However, this distribution channel introduces a number of substantial overhead costs which need to be passed on to the customer, thereby raising the minimum price of the software. For example, distribution of software through retail stores entails expenses related to packaging the products, transporting the products, storing the products, reserving shelf space for the products, and paying wholesaler and retailer profits. These costs, and middlemen profits, often translate into a few hundred percent mark-up for software titles while also requiring a high minimum product price. Also, because limited shelf space must be reserved for software titles, this reduces the number of software titles that any one store can provide. Retailers therefore limit the number of available software applications to the most recent or most popular titles. Developers of low cost software cannot easily compete for shelf space in retail stores, and if they could, the prices charged by retail outlets would be too large to move the products and, finally, the bulk of any profits would go to the retail stores, not the software developers.
Yet another retail channel of distributing software is via the Internet, e.g., by downloading computer software through web vendors that maintain software websites. Retail Internet software distribution does not work well for low cost software titles in part because the high costs of this distribution medium require that web vendors charge a very large percentage commission on each sale. Like in-store retailers, this causes the profit margins to decrease for low cost software developers and also causes the minimum price of the software to be inflated. Moreover, to use this distribution channel, a user has to have knowledgeable access to the Internet (and complex downloading and electronic unpacking techniques) which can restrict the customer base. Many existing web vendors are, in general, not always user friendly and consumers have difficulties in following installation and administrative instructions required in obtaining the software titles.
The third channel of software distribution involves bundling software with the hardware device itself. While useful for a very small number of applications, this software channel does not provide a wide avenue for mass software distribution, including the distribution of low cost software. The costs associated with bundling software with hardware devices make computer manufacturers very selective in the software they bundle. As a result, only a very small number of software titles are bundled with computer systems, be they desktop systems or PDAs. As a distribution channel, this one only provides a very small outlet for software distribution. Moreover, this distribution channel does not readily provide the software user with a mechanism for obtaining post-sale software upgrades, software fixes, etc.